THE EARLY BIRD GETS THE WORM :
CLIMATE CHANGE RISKS AND OPPORTUNITIES
Nicki Hutley , Independent Economist and Councillor , Climate Council of Australia
To quote Charles Dickens ’ opening lines from A Tale of Two Cities , “ It is the best of times , it is the worst of times , it is the age of wisdom , it is the age of foolishness ... It is the spring of hope , it is the winter of despair .” These lines could well have been written about the critical point at which we now find ourselves on the climate action journey ; and we can choose to be foolish and despair , or to be wise and hopeful .
The world ’ s climate scientists could not be clearer : human-induced climate change is accelerating and poses severe environmental , social and economic risks to us all . 1 Our response must match the scale and urgency of this challenge .
Fortunately , the economic message is clear : acting on climate change sooner , through a planned transition , can reap enormous benefits . This is particularly true of regional Australia which stands much to gain from progressive thinking – and much to lose from standing still .
ACUTE AND CHRONIC CLIMATE EVENTS HAVE HIGH COSTS We are already counting the costs from climate-driven disasters such as bushfires , droughts , cyclones , and flooding . These worsening climate impacts cause physical damages to property and infrastructure , but their impact goes well beyond what we can see . Economic activity is disrupted , productivity is lost , and health costs –
both physical and mental – rise . Even education is being disrupted as a result of increased absenteeism , when schools cannot adequately cool classrooms 2 , which can affect lifetime employment and earnings opportunities . The loss of life and biodiversity can be challenging to measure precisely in economic terms , but we know these costs are unacceptably high .
All told , climate-related disasters are estimated to have led to global economic losses of A $ 272 billion in 2020 alone , according to Munich Re research . 3 In Australia , the estimated cost to the Australian economy is currently A $ 38 billion per year . 4
Economic research is giving us an increasingly good understanding of the extent of damages from these extreme events and their mounting costs .
For example , the 2009 “ Black Saturday ” fires in Victoria are estimated to have had economic and social costs of $ 7 billion , while the more recent NSW “ Black Summer ” fires in 2019-20 are estimated to have cost $ 100 billion when the impact of the fires on business disruption , health and well being , as well as physical damages and environmental losses are taken into account . 5
Longer term chronic events , such as rising average temperatures and sea-level rise , add to the damage bill . Since 1890 , heatwaves have killed more Australians than bushfires , cyclones , earthquakes , floods , and severe storms combined . 6 They also lead to increased hospitalisations and strains on the health system .
In the US , research just published suggests climate-related health costs are now more than a trillion Australian dollars each year . This study also notes that the economic burden of health-related climate costs is unevenly distributed , with the greater burden falling on vulnerable communities . 7
And these costs will continue to rise over time . For Australia , under a high emissions scenario , the costs of extreme weather events coupled with acute risks such as rising sea levels and higher average temperatures , could amount to $ 94 billion per year by 2060 8 and $ 129 billion per year by the end of this century . 9 We are already bearing considerable costs from the 1.44 ° C of warming in Australia . Global costs are estimated to be a staggering $ 24.1 trillion per year by 2100 , or around 2 % of GDP . 10
For some , these costs may seem too far away . However , there are other more immediate and damaging costs that Australia faces from failure to act .
OTHER COUNTRIES ARE LOSING PATIENCE The European Union has recently announced a Carbon Border Adjustment Mechanism ( CBAM ) and this is expected